W-4 w/ Self-Employed & Investment Income

[taxes4739]

I'm filling out my first W-4, and I find it to be extremely unclear.

I have self-employment income, and investment income, and am filling this out for a new 'wage' job that I'm about to begin.

Step 2 says to complete that section if I have more than one 'job,' which it does not explicitly define, but I assumed to mean only includes 'wage' jobs (not self-employment work).  However, below, it says TIP: if you have self-employment income, then 'to be accurate,' use the estimator...which...leads me to think the opposite.

So I tried the estimator, but it asks questions that are utterly impossible to know (like how much self-employment income I will make and how much investment income I will make - both of which could be be anything from a large negative number to a large positive number, depending on how the year goes).

Then for step 4, it makes it sound like that extra withholding is entirely optional, so I'm inclined to put all zeroes (why give the IRS an interest-free loan prior to the tax deadline if I don't need to?).  However, multiple places I've read say that I could be at risk of an underpayment penalty.  I have failed to find any guidance on how the values I put on the W-4 might lead to such a situation.

I do pay 1040ES estimated payments every year, based on 100% of my prior year tax liability (as calculated by TurboTax).  This will be the first year I have 'wage' income, and thus, my first W-4.  Putting all 0's felt weird, especially when I do have other sources of income.  But plugging numbers into their estimator for what my investments and business will look like six months in the future is like throwing a dart.  So I'm not really sure what it wants me to do.

Any guidance would be appreciated, for any of the confusions described above.

[Mike9241]

the rules to avoid penalties for not paying in enough taxes during the year are either

90% of 2021 tax (which you say would be a guess)

or

100% of 2020 tax (110%if 2020 adjusted gross income is over $150K)

you say you're paying enough in estimated taxes to = 100% of 2020 taxes (i assume 2020 AGI is $150k or less)

thus you will not have penalties no matter how much you owe come 4/15/2022.

it becomes your decision as to whether or not you want a refund or owe.  

[taxes4739]

Awesome, very clear.  I wish they just put that on the form itself 😛

So that 100% (or 110% for 150k+) prior-year applies to all aggregate types of income, not just for self-employed?

So as long as my 1040ES are correct, I can literally have my employer withhold nothing at all from my paycheck, and there wouldn't be a penalty (with the understanding of course that I'd have a large bill come tax time)?